Discussion offered on Emerging Powers feature in Futures

Richard Whaley

Pieterse & Rehbein seek to stimulate discussion on their article and feature in the October 2008 edition of Futures (Ref 1), saying discussion is much needed.

What they discuss, with their colleague authors in more detailed papers is largely contrary to some of the most basic business trends of our time (Ref 2). Further, some of these basic trends are reported in newspapers as fact. The natural direction these trends are taking us is not that which the various authors seem to believe. In the process, they have not mentioned the Emerging Powers that may be the most important of all.

I have shown in a paper recently published (Ref 3) that the following World Development Trends are occurring:

'Conditions of Economic Growth' are rare in history, but are met in a small number of advanced nations moving out of the Mass Production phase into the Post Industrial Society. These Economic Growth Conditions are not necessarily met elsewhere in the world. The US scores far higher than the newly industrialising nations.

'World Development and New World Trading Patterns' shows that the only practical way for economic growth by the Post Industrials is by their basic manufacturing moving to less developed parts of the world, largely by the technical transfer roles of the Multi National Corporations (MNCs). Evidence shows this is occurring at a high rate for the US and UK. It gives a characteristic signature of growing company investments being made overseas, where a majority of company profit arises. For many parts of the world economic growth depends on MNCs operating there - and where countries are too unstable or hostile they may not grow.

COMMENT

Pieterse & Rehbein contend that US and Europe are being overtaken
by low cost producers in various
Less Developed Countries (LDC). In reality it is the advanced countries'
MNCs which are largely driving this trend, placing the various parts
of their operations in the best parts of the world. MNCs are the powers
which this Futures feature does not deal with, and which is central to future
trends. The New World Trading Patterns are a natural feature which is to be expected
at this time.

There are over 1000 MNCs larger in economic terms than the smaller nation states - with only a handful of bigger nation states - and this number is falling with time.

Nor is it the case that LDCs will overtake the Post Industrials. I
have shown in Ref 3 that there is no chance that these lower countries
will grow to rival US or Europe's economic GNP per capita in any time scale of interest to us. 1970s
work in this area is given in Ref 4.

It is true that low wages are part of the equation causing manufacturing to
migrate out of the Post Industrials to appropriate areas of the World. But as given
under World Development and New World trading Patterns in Ref 3 there are a raft
of other inputs, especially availability of raw materials and stability of the region
which encourage MNCs to found subsidiaries there. People need to think how
are other areas of the World going to develop - since it is a concern of all
developed countries to promote such development. Countries going through
economic development levels that the Post Industrials did in previous centuries
can be expected to undertake similar activities. That LDCs
take on activities currently being done by Post Industrials should not be considered
bad. In any event, the MNCs will see it does happen where it is profitable to them -
to the benefit of their shareholders and pensioners of the advanced world. One also
expects education levels to rise as a country develops.

Pieterse & Rehbein mention technical advances, but much of these advances
are provided by the MNCs in their technology transfer role. It should be noted that
the technology level liable to cause migration of manufacturing out of the Post
Industrials will always rise with time (Ref 5) - nothing is static, so the LDCs
will be moving to higher technology levels. The Rand Corporation has recently
asserted that US remains the scientific and technological power house of the
World (Ref 6) - the Post Industrials remain the source of new knowledge.

Industries in the advanced countries which have established MNC networks around
the World generally do not make the headlines. They are getting less dependant on
the economic fortunes of their mother country as more and more of their
profits come from elsewhere. It is the industries which failed to form MNC
networks which makes the headlines, with factory closures, job losses and liquidations.
If a firm has not established itself as an MNC by the time the technology level
makes its manufacturing liable to migration to other parts of the work then it is probably too
weak to do so. It is probably these that the academics see. Pieterse & Rehbein
state that US manufacturing wages have not risen since the 1970s. However,
US Consumer Expenditure in real purchasing power in 2007 was over twice that
in 1980 (Ref 7) - so the US economy as a whole is doing differently.

Pieterse & Rehbein mention Indian companies buying European steel companies. World Development in Ref 3 indicates that the more advanced LDCs have been forming MNCs.
The Advanced Countries' Steel Industry was one that failed to establish MNCs - and has largely
been eliminated. Whether it will work this way round time will tell - it is not too promising at the time of writing..

It is also clear that looking on the World in terms of countries is not sensible.
Our introduction of the MNCs as a large part of the driving powers in World
Development is one case in point. But different parts of a country can be
in different economic development levels. SE of UK had a Post Industrial
profile from the 1960s. When I became conscious of this in the 1970s, one
could see the very different landscape here from the Smoke-Stack landscape
of the UK Midlands. Thus we say in Ref 3 that countries around the Mediterranean
are typically at the Middle Ranking Country level - but the northern parts of these countries may
have a very different landscape and are at a higher level.

4. R H G Whaley, International Growth Rates in The Business Environment over the next two
Decades (Ed R Whaley), Society for Long Range Planning (now the Strategic Planning Society, London) 1979
www.BusinessTrendsLibrary.co.uk/econs.htm